11.3 Million (25%) of Mortgages Underwater
Cnn.Money.com and several others are reporting that according to FirstAmerican CoreLogic more than 11.3 million homeowners, almost 25% of all U.S. mortgages, owe more on their mortgage than their home is now worth as of the end of 2009. That is up from 23% and 10.7 million borrowers from three months earlier. An equally critical number is that over 10% of all mortgagees owe 25% more than their home is worth. “The rise in negative equity is closely tied to increases in pre-foreclosure activity,” CoreLogic said. Once a homeowner owes 25% more than the house is worth, foreclosure rates rise sharply.
The number of underwater mortgages increased by about 620,000 from the third quarter, the firm said. Another 2.3 million mortgages had less than 5% equity in their home, which could be wiped out if home prices fall further. “Negative equity is a significant drag on both the housing market and on economic growth,” said Mark Fleming, chief economist with First American CoreLogic. “It is driving foreclosures and decreasing mobility for millions of homeowners.”
Underwater mortgages are concentrated in few states. In Nevada, 70% of mortgages were underwater followed by Arizona (51%), Florida (48%), Michigan (39%) and California (35%).
These numbers, along with close to 10% delinquency rates for payments over 60 days late for both FHA and Jumbo loans, point to a slow recovery. It does however highlight likely upcoming opportunities for Short Sale and REO investors.